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How Is HRA Decided?: Basic Salary

House rent allowance (HRA) benefits are only available to salaried individuals and not self-employed individuals. To claim HRA, an employee must live in a rented accommodation and pay rent. If rent paid exceeds Rs. 1 lakh annually, the landlord's PAN details must be submitted with the HRA claim. HRA is decided based on salary and city of residence - 50% of salary for metro cities and 40% of salary for other cities. The actual HRA offered is the lowest of the HRA received from the employer, rent paid minus 10% of basic salary, or 50/40% of basic salary based on city.

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123 views1 page

How Is HRA Decided?: Basic Salary

House rent allowance (HRA) benefits are only available to salaried individuals and not self-employed individuals. To claim HRA, an employee must live in a rented accommodation and pay rent. If rent paid exceeds Rs. 1 lakh annually, the landlord's PAN details must be submitted with the HRA claim. HRA is decided based on salary and city of residence - 50% of salary for metro cities and 40% of salary for other cities. The actual HRA offered is the lowest of the HRA received from the employer, rent paid minus 10% of basic salary, or 50/40% of basic salary based on city.

Uploaded by

vempadareddy
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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House rent allowance benefits are only available to salaried individuals.

Self-employed
individuals are exempt from claiming HRA. This exemption is also available only if the employee
is living in rented accommodations. In case the employee lives in his/her own house and does not
pay any rent, he/she cannot claim HRA.

In case the employee is living in a rented accommodation and the rent paid exceeds Rs.1 lakh in one
financial year then the PAN details of the landlord need to be submitted along with the HRA claims.

How is HRA Decided?


HRA is actually decided based on the salary. There are some other factors that affect it which could
include things like the city in which the employee resides. If the place of residence is a metro city
then employees are entitled to an HRA equal to 50% of the salary. For all others cities the
entitlement is 40% of the salary.

For the purpose of calculating the HRA, the salary is defined as the sum of the basic salary ,
dearness allowances and any other commissions. If the employee is not receiving a dearness
allowance or commissions then the HRA will be 50%/40% of the basic salary.

The actual HRA offered will be the lowest of the following three provisions:

The amount received as the HRA from the employer.


Actual rent paid less 10% of the basic salary.
50% of the basic salary if staying in a metro city and 40% in a non-metro city.

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